Municipal yields improve; Washington brings $452.33 million bonds; New York water bonds price

By Sheri Kasprzak

New York, Jan. 19 - Municipal yields got a much-needed shot in the arm on Wednesday as investors headed back to the market, said traders reached during the session.

Intermediate bonds improved by as much as 5 basis points, and shorter and longer bonds were better by about 3 bps, said one trader.

"I think [investors] are slowly coming back," he said. "There's definitely been some interest [in secondary]. A lot of the doom-and-gloom stuff is starting to fade off in the news, and investors are starting to coming back."

Some supply in the primary market also helped take the pressure off secondary, noted the trader. The bulk of the week's light primary action came to market Wednesday.

Municipals might become more interesting to investors in the coming months, according to Gary Pollack, head of fixed income trading and research at Deutsche Bank Private Wealth Management during a reporters' breakfast Wednesday.

Pollack said that the market will see more straight taxable bonds and those bonds might draw investors who had been buyers of Build America Bonds.

Washington brings G.O. bonds

Looking to the healthy primary calendar from Wednesday, the State of Washington came to market with $452.325 million of series 2011 general obligation bonds (Aa2/AA+/AA+), said a pricing sheet. The deal was upsized from $445.625 million.

The sale included $361.95 million of series 2011B various-purpose G.O. bonds and $90.375 million of series 2011T-2 taxable G.O. bonds.

The 2011B bonds are due 2012 to 2031 with term bonds due 2033 and 2036. The serial coupons range from 4% to 5.75%. The 2033 bonds have a 5% coupon priced at 96.76, and the 2036 bonds have a 5.25% coupon priced at 99.038.

The 2011T-2 bonds are due 2012 to 2020 with 0.63% to 3.95% coupons. The 2012 and the 2013 bonds were not reoffered. The remaining bonds were all priced at par.

Bank of America Merrill Lynch won the competitive bid for the series 2011B bonds with a 4.977462% true interest cost. Citigroup Global Markets Inc. took the series 2011T-2 bonds with a 3.043901% TIC. Chris McGann, spokesman for the state treasurer's office, said the state received eight bidders for the tax-exempt bonds and 10 bidders for the taxable bonds.

"Washington's reputation for fiscal discipline and a continued commitment to balance our budgets has preserved our credit rating and continues to make our bonds attractive to many investors," treasurer James McIntire said in a statement released by McGann Wednesday.

"Washington's bonds stand out despite market skittishness about municipal bonds that has been driving up interest rates during the past few weeks. Taxpayers benefit when more investors compete for our bonds."

Proceeds will be used to finance capital projects, transportation projects, state buildings, public school skill center facilities and state programs for Columbia River Basin water supply development, farmland preservation, riparian protection and outdoor recreation.

New York water bonds sold

Also during the session, the New York City Municipal Water Finance Authority sold $450 million of series 2011EE water and sewer system second general resolution revenue bonds (Aa2/AA+/AA+), said a pricing sheet.

The bonds were sold through Jefferies & Co. Inc. with Barclays Capital Inc., Morgan Keegan & Co. Inc., M.R. Beal & Co. Inc. and Ramirez & Co. Inc. as the co-senior managers.

The bonds are due 2040 and 2043. The 2040 bonds have a 5.375% coupon priced to yield 5.47%. The 2043 bonds have a split maturity with a 5.375% coupon to yield 5.54% and a 5.5% coupon to yield 5.54%.

Proceeds will be used to finance improvements to the city's water and sewer system as well as to repay commercial paper notes.

SCPPA bonds price

Elsewhere, the Southern California Public Power Authority sold $197.7 million of series 2011 transmission project revenue refunding bonds, said a pricing sheet.

The sale included $170.4 million of series 2011A tax-exempt bonds and $27.3 million of series 2011B taxable bonds.

The 2011A bonds are due 2012 to 2019 with 4% to 5% coupons. The 2011B bonds are due 2011 to 2012 and have 1% to 1.25% coupons. The 2011 bonds will not be reoffered. The 2012 bonds are priced at par.

Goldman Sachs & Co. was the senior manager for the bonds (/AA-/AA-).

Proceeds will be used to refund all of the authority's series 1991 subordinated refunding bonds and to terminate outstanding swap agreements and a liquidity guaranty agreement.

The authority is based in Pasadena.

Andrea Heisinger contributed to this report

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